Lawmakers accuse BP of 'shortcuts'
Tuesday, June 15, 2010
To save time and drilling costs, BP took "shortcuts" that may have led to the oil rig explosion and the spill in the Gulf of Mexico, according to a letter released Monday by two House Democrats leading an investigation of the disaster.
The letter, sent in advance of congressional hearings with senior oil executives this week, paints a damning picture of five decisions the lawmakers said the oil firm took "to speed finishing the well," which was running "significantly behind schedule." Marshaling e-mails, interviews and documents, the lawmakers said: "In effect, it appears that BP repeatedly chose risky procedures in order to reduce costs and save time, and made minimal efforts to contain the added risk."
In one instance, four days before the April 20 explosion, Brett Cocales, one of BP's operations drilling engineers, sent an e-mail to a colleague noting that engineers had not taken all the usual steps to center the steel pipe in the drill hole, a standard procedure designed to ensure that the pipe would be properly cemented in place. "[W]ho cares, it's done, end of story, will probably be fine and we'll get a good cement job," he wrote.
Cocales could not be reached to comment Monday, and Andrew Gowers, a company spokesman, said only that "it would be inappropriate for us to comment ahead of the hearing."
The letter was part of another bad day for BP. The company's stock dropped 9 percent, to $30.67 a share. Investors fretted about a White House meeting Wednesday between top BP directors and President Obama, who will also make the oil spill the centerpiece of his first Oval Office address at 8 p.m. Tuesday. Speaking inside a large shelter at a Coast Guard clean-up staging area in Theodore, Ala., on Monday, Obama vowed that "we're going to continue to hold BP and any other responsible parties accountable for the disaster that they created."
That cost to BP will dwarf whatever amounts its rig workers were worried about. White House officials were working to strike a deal with the oil giant on a multibillion-dollar escrow account to compensate victims, administration advisers said. Led by White House counsel Robert F. Bauer, administration negotiators were hoping to finish an agreement before the meeting Wednesday. Obama called talks "constructive."
One potential area of disagreement loomed: whether the escrow account would be limited or whether it could be replenished, as the administration is demanding. BP is also seeking assurance that money be used only for reasonable or "legitimate" claims through an impartial administrator.
Investment analysts expect that BP might suspend or reduce its dividend to fund an escrow account that some lawmakers have demanded be as large as $20 billion. "Suspending the dividend would significantly reduce the political heat on BP and enhance its financial flexibility," said Fadel Gheit, an oil analyst at Oppenheimer. "BP can raise $20 billion in escrow account within days."
Meanwhile, rival oil companies, worried about new regulations or limits on deepwater drilling off U.S. coasts, began openly criticizing BP.
"What we do know is that when you properly design wells for the range of risk anticipated; follow established procedures; build in layers of redundancy; properly inspect and maintain equipment; train personnel; conduct tests and drills; and focus on safe operations and risk management, tragic incidents like the one in the Gulf of Mexico today should not occur," Kenneth P. Cohen, Exxon Mobil's vice president of public and government affairs, said in a blog.
But Exxon Mobil's criticism paled next to the 14-page letter that Rep. Henry A. Waxman (D-Calif.), chairman of the House Energy and Commerce Committee, and Rep. Bart Stupak (D-Mich.), chairman of the panel's subcommittee on oversight and investigations, sent to BP chief executive Tony Hayward, who will testify before the committee Thursday. After reviewing documents and interviews the committee obtained, the two lawmakers said that "BP appears to have made multiple decisions for economic reasons that increased the danger of a catastrophic well failure."
The money that BP allegedly saved seems trivial in light of the blowout that killed 11 Deepwater Horizon rig workers and led to the oil spill that has polluted large swaths of the gulf. But given the daily costs of $1 million to $2 million to run a drilling rig, they appear to have been a big factor in the decision-making.